What do we need to consider now that the UK has announced it will leave the European Union?
As yet we do not have a date for when the UK will officially be divorcing itself from the European Union (EU). In fact, following the resignation of David Cameron the Article 50 process is unlikely to start until well after October when a new Conservative leader is appointed.
While this will prolong the period of uncertainty for the UK, it will also slow any dramatic change and give both the UK and the EU time to settle and discuss the situation.
This delay is unlikely to help those searching for answers on what this means for them. With the strong possibility that organisations will have to make key decisions on how they manage business policies, expenditures, and expansion as trade policies could change, pricing could shift, employment laws could change… amongst a sea of other possibilities. And how will British expatriates deal with the news? Will they return to the UK over fears of losing their rights? What does a leave vote mean for them? Although nothing will change overnight a weaker Pound could certainly impact their lifestyle if they are buying Euros with Pound Sterling.
What was the initial impact of the announcement that the UK would leave the EU?
On the news of the leave vote the Pound slumped to 1.20 against the Euro at it’s lowest point, David Cameron announced his decision to step down as Prime Minister, the FTSE dropped by over 600 points shortly after opening, Scotland are considering calling their own Referendum and this could be just the beginning.
Moving forward, we are expecting a new Prime Minister to be announced before the Conservative Party Conference in October, who should then trigger Article 50. Following this the UK will be offered a deal by the EU and negotiations will take place. This is unlikely to better than our existing agreement, with the EU keen to dissuade other EU members from leaving. The German Finance Minister Wolfgang Schauble commented, “If the majority in Britain opts for Brexit, that would be a decision against the single market. In is in. Out is out.”
Will the Pound continue to weaken following the initial shock of a Brexit?
Will the Pound continue to weaken in the coming days? I believe it will, I think the GBPEUR rate will settle between 1.17-1.20, with the GBPUSD around 1.32-1.36, lows not seen in over 3 decades.